The Île-de-France property market: sales volumes in freefall

One of the major factors behind this fall is the rise in interest rates, which peaked at 3.62% in December 2023 before stabilising at around 3.4% in June 2024. Rising rates have a direct impact on households’ borrowing capacity, particularly those wishing to acquire exceptional properties. Buyers who could previously finance themselves at very low rates now face much more restrictive conditions. The result is a general slowdown in purchasing decisions.

The other key factor is a wait-and-see attitude on both sides of the market. On the one hand, buyers faced with economic uncertainty prefer to take their time before committing. On the other, sellers of luxury properties often choose to hold back. This phenomenon is particularly visible in the large-property segment, where properties worth more than €2 million are becoming scarce on the market, not because of a lack of demand, but because owners are waiting for what they consider a more favourable moment. Some buyers are also betting on a sharper fall in prices in the coming months, which encourages them to postpone their decision.

The segment of older houses has suffered the most. Whereas strong demand was still being seen after the health crisis, house sales in Île-de-France have fallen by 21% in one year and by 44% in two years. This decline is partly explained by the shrinking supply, but also by the growing difficulty of obtaining sufficient financing for this type of property.

The end of the post-Covid boom played a key role, and the new energy performance regulations have had a deterrent effect: the Climate and Resilience Act, which imposes strict restrictions on dwellings rated F or G, has contributed to a reluctance to buy energy-inefficient properties, which are now subject to significant discounts.

Prices of luxury properties have fallen by 6.7% in one year, both in Paris and in the inner suburbs. The correction is not uniform: the 7th arrondissement remains among the most expensive at €15,800/m² with a moderate fall, while less central districts are seeing falls of up to 10%. Dwellings requiring works, located in less sought-after areas or rated F or G, are subject to significant discounts; properties in excellent condition and well located continue to sell with little negotiation.

According to preliminary sale agreements, the fall should slow in the most sought-after districts by the end of the year, and the prospect of lower rates in autumn 2024 could revitalise the market.

Contrary to expectations, the Olympic Games did not trigger a wave of purchases by foreign investors during the summer: the global economic context, geopolitical tensions and the logistics of the event held back transactions. It was luxury short-term rentals that really benefited, with record prices of up to €1,100 per night in sought-after districts. But the effect should not be judged solely in the short term: previous host cities, such as London and Tokyo, saw a significant rise in prices in the months following the event. The heightened profile of Paris should encourage renewed interest from foreign investors, who continue to regard the capital as a safe haven.